New Delhi:
The Ministry of Finance will discuss with the market regulator Securities and Exchange Board of India (SEBI) to exempt Life Insurance Corporation (LIC) from the minimum standard of public shareholding, said Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management (DIPAM), Friday.
According to the SEBI’s minimum public shareholding standards, listed entities with a valuation of more than one lakh crore must have at least 25 percent public shareholding within 5 years of listing.
The government had exempted government agencies from this standard last year.
The government is selling over 22.13 crore shares in LIC at a price range of Rs 902-949 each in the IPO, which starts on May 4 and closes on May 9. LIC was set to begin trading on exchanges on May 17.
The government expects to raise about Rs 21,000 crore from LIC IPO, which values the state insurer at Rs 6 lakh crore.
Mr. Pandey, who briefed reporters ahead of the mega-IPO IPO, said the government will not dilute its stake in Life Insurance Corporation within a year of listing.
“Ahead of the roadmap for a very large player like LIC, we will have to consult with SEBI and the Ministry of Economic Affairs for the right kind of roadmap for minimum public shareholding. We know it is not easy. Even 5 percent at the moment would not acceptable to the market,” Pandey said.
According to SEBI standards, companies with a valuation above Rs 1 lakh crore are required to sell a minimum of 5 percent stake in the IPO. However, LIC is exempt from this guideline.
“We had to seek special SEBI waiver for easing for a share dilution of 3.5 percent. The reason for this was that a very large company entered the arena. We also had to consider how this affects the capital market in general. effect,” Mr Pandey added.
Financial Services Secretary Sanjay Malhotra said: “…standards do not exist for exceptional cases such as LIC. Despite a huge reduction to 3.5 percent (from 5 percent), it (IPO) is still the largest. Standards only ensure the normal LIC is not normal.”
Speaking at the event, Mr. Malhotra said that the built-in value of new businesses is small and they have greater growth potential.
Based on investor feedback, the market value of state-owned LIC has been set at 1.1 times the embedded value of Rs 6 lakh crore. “LIC comes at a time… It is a very mature organization. Normally companies grow with IPO, but here we have a fully-fledged and mature organization. It not only gives the opportunity to reorient and reinvest oneself, but it gives a huge opportunity for investors.
“Policyholders have been granted special dispensation… We have offered the highest discount to policyholders given their role in creating value in LIC,” said Mr. Pandey.
While retail investors and LIC employees get a discount of Rs 45 per share, LIC policyholders bidding at IPO get a discount of Rs 60 per share.
When asked about potential Chinese investment in LIC’s IPO, Mr. Pandey said the anchor book will be released on May 2 and that foreign investment in the company will be according to DPIIT guidelines.